Deutsche Bank: The Renminbi Will Be The World's Next Major Reserve Currency

Deutsche
Bank analyst Alan Cloete argues the renminbi is
expected to become a major reserve currency in the next
decade, a move that could see the greenback's share of
global reserve currencies fall from about 60% now, to 50% by
2020.

Cloete notes that Berkeley economist Barry
Eichengreen has said that the renminbi could account for 15%
of global currency reserve holdings within ten years.

Cloete elaborates:

"Demand for RMB is bound to accelerate, given China’s commitment
to liberalize its capital and current account by the end of 2015.

Hardly a month goes by without the People’s Bank of China further
loosening the restrictions on onshore RMB trade settlements for
foreign investors and customers. For instance, since August 2011
foreign businesses have been able to settle contracts in RMB in
any province in China, a relaxation of the rules that would have
been unimaginable even two years ago."

In September, Chile's central bank said 0.3% of its international
reserves were held in renminbi. We previously wrote about major
oil player
Nigeria's plan to diversify 5% - 10% of its foreign exchange
reserves to include the yuan.

The yuan may also become more easily accessible for foreign
investors. Hong Kong already operates as an offshore yuan
trading market, and China is looking to start another in London,
while Singapore has expressed its interest as well. And of
course, there's been all that chatter about the
yuan becoming fully convertible as early as 2015.

Cloete also adds that a few years from now, the Hong Kong dollar
could eventually merge with the renminbi as well.